Using before tax cash flow analysis, determine the annual crossover volume between 2 machines given the data below Use an interest rate of 11 5 Life of both is 8 years Option A B Purchase 90,000 110,000 Salvage 7,000 9,000 Annual Maintenance Cost 6,000 5,400 Unit Costs 35 50 28 90 a What is the maximum annual volume that option A has the lowest cost b What is the best total ANNUAL cost at an annual volume of 4500 units per year

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Question: Using before tax cash flow analysis, determine the annual crossover volume between 2 machines given the data below. Use an interest rate of 11.5%. Life

Using before tax cash flow analysis, determine the annual crossover volume between 2 machines given the data below. Use an interest rate of 11.5%. Life of both is 8 years.

Option	A	B
Purchase	90,000	110,000
Salvage	7,000	9,000
Annual Maintenance Cost	6,000	5,400
Unit Costs	35.50	28.90

a. What is the maximum annual volume that option A has the lowest cost ?

b. What is the best total ANNUAL cost at an annual volume of 4500 units per year?

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